7.1 Classical Chart Patterns
Key Takeaways
- A reversal pattern forms after an identifiable advance or decline and is completed by a close through a boundary (neckline, reaction swing, or trendline), typically on expanding volume.
- A continuation pattern is a rest after an impulse; flags and pennants show heavy volume on the pole, light volume in the coil, and expansion on the break in the pole's direction.
- Consolidation is a temporary two-sided auction whose range and volume usually shrink; a trend is a one-sided auction whose impulses carry participation.
- Gap types are common (inside congestion, often filled), breakaway (leaves a base on heavy volume), runaway/measuring (mid-move, rough halfway idea), and exhaustion (late climax that fails and fills).
- A Level I measured move copies the pattern's (or pole's) vertical height from the breakout in the break's direction; it is a working objective, not a magnet.
Classical Techniques carries 33% of CMT Level I weighting in the 2026 Program Guide. This unit, chart pattern analysis, is how a technician reads shapes that form when price pauses, reverses, or rests inside a trend. Independent OpenExamPrep material for CMT Level I treats a pattern as a map of an auction, not as a logo that guarantees a target. The CMT Association owns the Chartered Market Technician (CMT) designation and administers the CMT Program. These pages are not an Association publication and do not claim official approval, review, or partnership.
A classical chart pattern is a recognizable geometry of swing highs and swing lows, usually with a volume story. The geometry tells you whether buyers and sellers are changing control (reversal) or pausing inside an already identified trend (continuation). The volume story tells you whether the crowd sponsored the shape.
Reversal versus continuation — and the volume that belongs to each
A reversal pattern appears after an identifiable advance or decline and argues that the dominant side is losing. Completion is usually a close through a boundary (a neckline, a reaction low, a trendline), not a wick that finishes back inside the shape.
A continuation pattern appears after an impulse (a pole or a trending leg) and argues that the pause is rest, not a change of regime. Completion is a break in the direction of the prior impulse.
Volume is not decoration. Classical reading pairs price shape plus participation:
| Pattern family | Typical volume during the shape | Typical volume on the break | What a violation of that volume story means |
|---|---|---|---|
| Reversal (head-and-shoulders, double/triple top or bottom) | Often lighter on the last test of the extreme (right shoulder, second peak, third trough) as the old trend's sponsorship fades | Expands through the neckline or intervening swing | A pretty head-and-shoulders that breaks the neckline on a dead tape is a weaker claim |
| Continuation (flag, pennant, many rectangles and triangles) | Contracts while price coils; the market is catching its breath | Expands as the prior trend resumes | Heavy two-sided volume inside a so-called flag may mean you labeled a range, not a rest |
| Triangle / wedge | Dries up into the apex as the range shrinks | Expands on the leave-taking | A drift through a line on no volume is often a false break |
Exam trap: treating every triangle as continuation and every head-and-shoulders as reversal without looking at where the shape sits and how volume behaved. A triangle after a long rise that breaks down is a reversal of that rise, even though triangles are often filed with continuation examples.
Psychology: consolidation versus trend
In a trend, one side is repeatedly winning the auction. In an uptrend, buyers lift offers and defend higher lows; shorts who fade the rally are forced to cover, which adds fuel. In a downtrend, sellers hit bids and cap lower highs; bargain hunters are run over. Volume that expands with the impulse and contracts on ordinary retracements is the participation signature of that one-sidedness.
In a consolidation (rectangle, triangle, flag, pennant, the body of a wedge), the auction is temporarily two-sided. Buyers and sellers have found a balance zone. Each side absorbs the other near the edges. As the range narrows, fewer traders are willing to transact away from the last agreed area — that is why volume typically shrinks. The psychology is not that nothing is happening. It is disagreement being compressed. When the balance fails, the trapped side must exit and the missing side must chase: that is why breakout volume often expands.
Flags and pennants are the short, resting version of that psychology after a violent one-sided move. Rectangles are a longer, horizontal version. Head-and-shoulders and double tops are what it looks like when the trend side stops winning at the same neighborhood of price.
Head-and-shoulders and inverse head-and-shoulders
A head-and-shoulders top is a three-push failure after an advance:
- Left shoulder: a rally and a reaction.
- Head: a higher high, then a decline that often returns near the left-shoulder reaction.
- Right shoulder: a rally that fails to exceed the head (often similar in height to the left shoulder), then a decline.
The neckline connects the two intervening troughs. The pattern is a sketch until price closes through the neckline. Volume classically is heavier into the left shoulder and the head, then lighter on the right-shoulder rally — demand is tiring. The breakdown through the neckline should show expanding volume. A later return to the neckline from below is a pullback (polarity from the trend unit).
An inverse head-and-shoulders is the bullish mirror after a decline: left shoulder, lower head, right shoulder, neckline across the intervening peaks. Volume should expand on the upside break, because a bottom that nobody sponsors is just another pause in markdown.
Worked sketch: left-shoulder high 48, head 54, right-shoulder high 49, neckline across troughs near 44. Height = 54 − 44 = 10. A closing break of 44 projects a measured objective near 34 (44 − 10) on an arithmetic chart. If the right-shoulder rally printed on half the volume of the head, the volume story matches the textbook top.
Double and triple tops and bottoms
A double top is two peaks at approximately the same resistance after an advance, separated by a reaction trough. Confirmation is a close through that trough. Volume is often lighter on the second peak. A triple top adds a third failure at the same ceiling; the confirming break is still the lowest intervening low (or a decisive trendline through the reaction lows).
A double bottom is two troughs at approximately the same support after a decline; confirmation is a close through the intervening peak. A triple bottom is three holds of the floor. Volume should pick up on the upside confirmation.
These are horizontal cousins of head-and-shoulders. The head is missing because the second (or third) test did not make a new extreme — or made only a marginal one. Do not demand tick-perfect equality. Demand the same resistance or support neighborhood plus a confirming break.
Worked sketch: peaks at 81.20 and 80.90, intervening low 74.00. A close through 74 confirms the double top. Height is about 81 − 74 = 7. Arithmetic objective is about 74 − 7 = 67.
Triangles, rectangles, and wedges
A symmetrical triangle has a descending resistance line and an ascending support line. The market is coiling. The break can be either way; often it continues the prior trend, but Level I wants you to wait for the break and to see volume expand as price leaves the coil. Measuring height is taken at the widest part of the triangle and projected from the breakout.
An ascending triangle has flat resistance and rising support — buyers are willing to pay up on each dip while a lid remains. The usual resolution is up through the lid. A descending triangle has flat support and falling resistance — the usual resolution is down through the floor. Usual is not certain: a failed ascending triangle that breaks down is a real (and nasty) reversal of the bullish presumption.
A rectangle is a horizontal trading range: comparable highs, comparable lows. Volume often quiets inside the box and expands on the leave-taking. Rectangles can continue the prior trend or reverse it; the break direction is the verdict. Height of the box is the Level I measured-move input.
A rising wedge has two upward-sloping, converging lines (each high and each low still rising, but the range is shrinking). It often behaves as a bearish pattern: a reversal after an advance, or a continuation rest in a decline. A falling wedge is the bullish mirror. Volume contracts as the wedge tightens; the break against the wedge's slope should expand.
Flags, pennants, and their volume
A flag is a short counter-slope parallelogram (or small rectangle) that appears after a sharp pole. In an uptrend the flag usually drifts down or sideways; in a downtrend it usually drifts up or sideways. A pennant is the same idea drawn as a tiny symmetrical triangle. Both are brief. If the so-called flag lasts as long as the pole and travels most of the pole's height, you no longer have a rest — you have a retrace or a new range.
Volume is the identity test:
- Pole: volume expands (the impulse is sponsored).
- Flag or pennant: volume shrinks (the rest is not a new war).
- Break in the pole's direction: volume expands again.
Worked sketch: a stock runs 40 to 52 on heavy volume (12-point pole), then drifts 52 to 49.50 on light volume for six sessions in a small downward channel. A close back through the channel's upper line on expanding volume is the continuation. The measured move at Level I is pole height projected from the break of the flag. From a 52 break, 52 + 12 is a crude arithmetic sketch near 64. Know that you should be able to define that method. Do not treat one pixel as a promise.
Gaps: common, breakaway, runaway (measuring), and exhaustion
A gap is a void on a bar or candle chart: today's low is above yesterday's high (up gap), or today's high is below yesterday's low (down gap). Gaps are classified by where they appear and how volume behaves, not by the size of the hole alone.
| Gap type | Where it appears | Volume character | Follow-through idea |
|---|---|---|---|
| Common gap | Inside a congestion area or quiet range | Often ordinary or light | Frequently filled (price comes back through the void). Little trend information. |
| Breakaway gap | Leaves a base, rectangle, or other congestion; starts a new directional leg | Typically heavy | Often stays open for a long time. The void becomes a support/resistance memory. |
| Runaway (measuring) gap | Mid-move, after the trend is already obvious | Still healthy; not a last-gasp climax | Classical halfway reading: the gap neighborhood is a rough midpoint of the impulse. That is a definition-level measuring idea, not a guarantee. |
| Exhaustion gap | Late in an extended trend | Often a climax (very heavy) | The next sessions fail to follow through; the gap is filled as the move dies. |
Worked contrast: a stock coils 28–30 for a month, then opens at 31.40 on twice-average volume and never trades back to 30 that week — breakaway. Two weeks later, already at 36, it gaps to 37.20 on solid volume and keeps trending — candidate runaway/measuring. If instead, at 41 after a vertical rise, it gaps to 43 on huge volume and the next two closes are back at 40.50, that hole was exhaustion.
Do not call every opening jump a breakaway. If the gap is inside last month's rectangle and fills in two days, it was common.
The measured-move idea at Level I
A measured move (price objective) is a definition, not a prophecy. You take a vertical height — the head-to-neckline distance, the double-top peak-to-trough, the rectangle height, the triangle's base, or a flag's pole — and you project that height from the breakout in the direction of the break.
On an arithmetic chart the height is in points. On a log chart a serious projection is a ratio; that distinction was the y-axis unit. This unit only needs the idea: pattern height, copied from the break, in the break's direction. Objectives are working targets for reward-to-risk, not magnetic prices.
Putting the catalog to work
When a stem shows a shape:
- Name the prior trend (or say you cannot).
- Decide reversal versus continuation from location, not from the prettiest label.
- Name the boundary that must break (neckline, trough, triangle line, flag rail).
- Check whether volume matches the family.
- If asked for an objective, apply the measured-move definition.
- If a gap is in the stem, classify it by location and volume, then say whether filling is typical.
Independent CMT Level I practice by OpenExamPrep is at /practice/cmt.
On a textbook flag or pennant, how should volume typically behave?
What is the Level I measured-move idea for a completed classical pattern?
Which statement correctly classifies a gap?